Washington, D.C., March 27, 2017 - The Institute of International Finance today released a new report on regtech that addresses how such solutions can improve the ability of financial institutions in detecting and reporting financial crime, and complying with associated regulations. The report also puts forward policy recommendations to allow regtech solutions to better address banks' compliance needs.
"Financial institutions play an important role in the process of identifying and reporting suspicious activities to national law enforcement agencies," said Bart Van Liebergen, associate policy advisor and author of the report. "Regtech solutions promise to dramatically improve the ability, speed and efficiency of financial institutions in analyzing and sharing data for detecting and reporting financial crime."
The paper, written in coordination with IIF's Regtech Working Group, identified several technologies that are or may contribute to advancing financial crime monitoring and reporting, including:
- Big data technologies including clouds, data lakes and data processing engines, which provide a central infrastructure allowing financial institutions to gather, index, store and speedily access vast amounts of information across their organization.
- Biometrics and cyber security, which improve the ability of financial institutions to unambiguously determine a client or counterpart's identity, automate onboarding and remote access to services and improve the security of interactions with a client.
- Machine learning, which has led to vastly improved analytical capabilities through its ability to apply detection rules to vast volumes of data, identify complex patterns and non-linear relationships and analyze unstructured data sources. When applied to transactions and account monitoring, it can detect suspicious activity more accurately.
- Robotics and the use of artificial intelligence can automate manual tasks and can manage processes related to AML/KYC investigations.
- Shared utilities and distributed ledger technology (DTL) could be applied to AML/KYC information storage and sharing among financial institutions and financial intelligence units.
The IIF also made six recommendations that would allow regtech solutions to strengthen the AML/KYC framework and improve compliance. "These recommendations focus on improving the regulatory landscape for AML/CFT compliance and promoting enhanced information sharing across the financial system," said Matthew Ekberg, Senior Policy Advisor at the IIF. Recommendations include:
- Close gaps in the international AML/CFT framework;
- Improve global data sharing policies;
- Create a proper environment for regtech innovation;
- Shared utilities should foster regulatory reliance and increase efficiencies;
- Make regulation and supervision resilient to continuous technological innovation; and
- Adjust supervisory focus as automation alters the nature of risk in the financial sector.'
This report follows on several other publications the IIF has released over the last two years under the guidance of the IIF Regtech Working Group.
The Institute of International Finance is the global association of the financial industry, with close to 500 members from 70 countries. Its mission is to support the financial industry in the prudent management of risks; to develop sound industry practices; and to advocate for regulatory, financial and economic policies that are in the broad interests of its members and foster global financial stability and sustainable economic growth. IIF members include commercial and investment banks, asset managers, insurance companies, sovereign wealth funds, hedge funds, central banks and development banks. For more information visit www.iif.com.